JOHANNESBURG (miningweekly.com) – Dual-listed Harmony Gold on Tuesday posted a R4.54-billion net loss for the 2015 financial year, compared with a loss of R1.27-billion in the prior financial year, mainly owing to R3.5-billion in impairments incurred during the three months ended June 30.

Impairments of R3.47-billion were incurred following the restructuring of a number of operations in response to a low gold price and high operating costs. A R2.11-billion impairment was taken in respect of the Hidden Valley mine, R1.04-billion on Doornkop, R278-million on Phakisa and R43-million on Freddies 9.

The gold producer further reported a headline loss a share of 189c for the year under review, compared with a headline loss a share of 26c the year before.

Gold production fell by 8% year-on-year to 1.08-million ounces, compared with the 1.17-million ounces produced in the 2014 financial year.

The company attributed the lower production mainly to the closure of the unprofitable Target 3 operation and the restructuring of its Kusasalethu, Hidden Valley and Doornkop operations for profitability reasons.

The company’s all-in sustaining costs remained stable at $1 246/oz.

Harmony CEO Graham Briggs further pointed out that operational capital expenditure (capex) reduced by 2% from R2.52-billion to R2.47-billion.

“Although there are a number of uncertainties that we have to deal with, Harmony's board and management will continue to manage what we can, namely production volumes and operational costs,” stated Briggs.

He highlighted that Harmony had restructured underperforming operations, cut corporate costs, curtailed its capex and reduced labour numbers.

Briggs stressed that Harmony’s strategy of being a value-focused company that created value through increasing margins and generating the cash necessary to develop its Golpu copper-gold project in Papua New Guinea remained unchanged.

“To ensure that the value of all of our assets are accounted for in our share price and to create a viable investment case, we are assessing ways of funding Golpu and unlocking the true value of each of our assets.

“This will ensure positive shareholder returns in the long term. Our exploration team has enjoyed, and continues to enjoy, considerable success in locating copper-gold mineralisation [at Golpu].”

At the end of July, Harmony also reported “superb” exploration drilling results from the Kili Teke prospect, in the Hela province of Papua New Guinea. Kili Teke is a porphyry-style mineralisation with significant copper-gold intercepts.

Briggs said more upside potential was found as Harmony continued to explore the region.

He stated that, in a world where new discoveries were rare, Harmony was encouraged by the prospect that Kili Teke could well develop into another major copper-gold discovery. 

LABOUR RELATIONS
On May 19, 2015, Harmony started a 60-day consultation process with organised labour at its Doornkop mine, 30 km west of Johannesburg, in terms of Section 189A of the Labour Relations Act, with a view to find ways to return the mine to profitability or to place the mine on care and maintenance.

Following several meetings with organised labour, Briggs said Harmony and the unions agreed to a new operational plan for Doornkop that would return the mine to profitability and saving a significant number of jobs. 

The newly agreed plan for Doornkop meant that only 526 employees (including contractors) would still be affected by the proposed job cuts.

Of the 526, about 183 people have either been reskilled for redeployment elsewhere in Harmony or elected to accept a voluntary severance package (VSP).

Meanwhile, the Masimong gold mine, in the Free State, had been restructured for profitability by reducing development rates and concentrating on higher-grade areas.

“This strategy will reduce the mine’s remaining operational life expectancy to about two years and, while this is short, they are expected to be two profitable years,” Briggs explained.

A total of 373 people were affected, of which 229 were transferred to other operations and 74 accepted VSPs. 

WAGE NEGOTIATIONS

The 2015 round of wage negotiations in the gold sector started on June 22, 2015 between the Chamber of Mines, representing five gold companies, and the four trade unions, Association of Mineworkers and Construction Union, National Union of Mine Workers, UASA and Solidarity.

Briggs said that the approach to this year’s wage negotiations had been “distinctly different” in the hope that the negotiated outcome is cognisant of the economic realities of the individual gold producers negotiating under the auspices of the Chamber of Mines.

These discussions were still ongoing, he noted.